Tuition has risen dramatically at US colleges and universities, while revenue from state and local governments has generally fallen, says Cleveland Fed researcher
Federal Reserve Bank of Cleveland economist Peter Hinrichs analyzed trends in inflated-adjusted revenues per student at US colleges and universities between 1987 and 2013. Focusing on four-year public and four-year not-for-profit private institutions, Hinrichs finds that:
- Tuition per student has risen dramatically at both public and private institutions. Tuition revenue per student at public universities, $3,600 in 1987, had reached $9,300 by 2013. Tuition revenue has also risen at private institutions, reaching $20,000 per student by 2013. (All amounts are in 2013 dollars.)
- Revenue from state and local governments has generally fallen over time, while funding from the federal government has risen. For public colleges and universities, revenue from state and local sources was more than three times the level of revenue from tuition in 1987, but by 2013, tuition revenue was nearly equal to revenue from state and local governments.
- Investment returns are a large but volatile source of revenue for colleges and universities in the United States. This is especially true for private institutions, where inflation-adjusted investment returns were nearly $22,000 per student during the 2007 fiscal year but had fallen well into negative territory during the recession two years later.
“Unless colleges are able to reduce spending, it is likely that a reduction in revenue from one source will be met with an increase from another source,” says Hinrichs. “For example, if state and local support for higher education continues to fall, tuition may continue to rise,” says the researcher.
For Hinrichs’ related studies on higher education finance, see:
Federal Reserve Bank of Cleveland
The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.
The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.
Doug Campbell, email@example.com, 513.455.4479